| Economics Essay
Economics have an enormous number of definitions and a number of contradictions are found in it. All the definitions of economics have passed through 3 stages. Classical economists stressed on wealth; new classical criticizing the concept of wealth, made economic welfare the center of their thoughts while the modern economists made abundance of wants and scarcity of means as a base of their definitions of economics. Adam Smith represents classical, Alfred Marshal represents the neo-classical school of thoughts and the moderns are represented by Lionel Robbins.
Adam smith (1723-1790) who is known as a father of economics, in his work An enquiry into the causes and nature of wealth of nations defined economics first time in 1776. He, defining economics said that:
Economics is the study of wealth.
The above mentioned book of Smith has been divided into four parts; Consumption, production, exchange and distribution of wealth. The concept of Economics is so broad that it covers a lot of things as whole. The concept of subsidy is also comes under the umbrella of Economics. We have to describe the pros and cons of the subsidy allowed us for our newly launched business. Let me describe the term subsidy first and then we will shift our gears towards the main theme of this paper.
A subsidy (also known as a subvention) is a form of monetary assistance paid to a corporate or fiscal sector. Most the government made subsidies to producers or distributors in commerce to foil the decline of that industry (e.g., as the findings of continual unprofitable operations) or a growth in the prices of its food or easily to promote it to hire more work (as in the container of a wage grant). Examples are subsidies to push the auction of exports; subsidies on some foods to keep down the detriment of living, especially in city areas; and subsidies to promote the expansion of rear production and achieve nature trust in food production. Subsidies can be regarded as a form of protectionism or trade barrier by making domestic freight and services artificially competitive against imports. Subsidies may distort markets, and can inflict large lucrative expenses. Financial assistance as a grant may come from one’s government, but the tenure grant may also refer to assistance settled by others, such as individuals or non-governmental institutions, while these would be more usually described as goodwill. In level amount and inquire curve diagrams, a funding will modify also the query curve up or the reserve curve down. A subsidy that increases the production will cultivate to answer in a minor charge, while a subsidy that increases petition will lean to findings in an enlarge in penalty. Both bags outcome in a new economic equilibrium, therefore it is basic to respect elasticity when estimating the full overheads of a designed subsidy: it equals the subsidy per group (difference between promote value and subsidized assess) times the new equilibrium quantity. One group of freight suffers excluding from this provoke: Public cargo are once produced in ample stock and the total overheads of subsidies remain faithful regardless of the number of patrons; depending on the form of the subsidy, however, the number of producers on demanding their piece of payback may still revolt and coerce overheads up. The recipient of the subsidy may necessary to be distinguished from the beneficiary of the subsidy, and this analysis will depend on elasticity of fund and claim as well as other factors. For example, a subsidy for consumption of milk by patrons may happen to allowance patrons (or some may advance and the consumer may spring no gain, as the superior prices for milk offset the subsidy. The net provoked and identification of winners and scum is seldom straightforward, but subsidies normally effect in a removal of wealth from one group to another (or transmit between sub-groups). Subsidy may also be worn to refer to government actions which threshold competition or raise the prices at which producers could vend their products, for example, by using rate protection.
Inevitably, we will have a number of advantages (both economic and non economic) from the subsidy which has been granted to us and in our view this action will certainly gives us a chance to explore our potential earning. We have initiated a good for our city which will help us to keep our society and city clean, green and healthy. To accomplish the same in a perfect manner we have decided to attract a new garbage processing facility which will clean the garbage from the street of the city.
The economic advantage of this action will be great. The subsidy you have provided us will increase the economic benefit for us as it allows us to tax holidays. Let me tell you how this stance will help us economically. Let say from the services and receipts, we have earned US$700,000 and after all the expenses like general and admin expenses and the cost of providing the service, the operating income we have is US$500,000. This income is operating means we have not paid income tax on that income which is mandatory for each business doing entity except those who are totally exempt from this obligation. The facility which you have provided to us regarding the subsidy is great; it means we dont have to pay income tax on our full income because US$300,000 subsidy will be subtracted from our total operating income. Let me tell you quantitatively that how much benefit we will get from this proposed stance.
Let suppose the corporation tax rate is 40% means you have to give $40 from your $100 income to the government. Continuing the above example, our operating income before tax was US$500,000, let say if we were not granted the subsidy then we have to pay US$200,000 to the government and the Net Income will be US$300,000. Now comes towards the effect after the providing of subsidy. We have to subtract the subsidy from the net income before tax amount ($500,000-$300,000) and the operating income now count as $200,000 and we have to pay the 40% tax on this amount rather than on the full amount which will be US$80,000. So what we have saved? We have saved US$420,000 which previously was US$300,000. This increment of net income will certainly help us to reinvest it for the future consequences and to help the people in a more impeccable manner.
This all elaboration is for the non technical people who dont know much about the accounting and debit credit rules. In the end we would like to thank you people who gave us the opportunity accomplish our task in a proficient manner. We are glad to have such parliamentarians on our head who are dedicated towards their services. Heads off for you people. Thanks again.
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